Ford says new Asia-Pacific plants to boost flexibility

[robbo/region15]

Interesting article........

http://in.reuters.com/article/2012/0...8J634Z20120806

[Road_Warrior]

Yep, plants for China in particular are going to be huge, a new one just announced is going to have a capacity of 1.2 million units per year, and they need that capacity purely to satisfy their domestic market which will eclipse the whole North American market soon

EDIT: Here's the article I was talking about, from Bloomberg:

oe Hinrichs, Ford Motor Co. (F)’s top executive in Asia, has a solution for the carmaker’s minnow status in China: cheap cars in backwaters.

“If you want to become a volume leader in the world, you’ll have to compete at the lower price points because that’s where the growth is,” Hinrichs, who oversees Ford operations in the Asia Pacific and Africa region, said over lunch at Morton’s in Shanghai last week. “In China, we decided -- and you can debate the intelligence of that decision -- not to offer a full range of products. That’s something we’re changing.”

For now, Ford’s offerings in China are neither cheap enough nor extensive. The Fiesta subcompact, the lowest-priced of the automaker’s five models, costs 40 percent more than General Motor Co. (GM)’s entry-level Chevrolet Sail. Volkswagen AG (VOW), Europe’s largest carmaker, has a product lineup that starts from the 75,800-yuan ($12,000) Jetta to the 2.32 million-yuan Audi R8 sportscar.

Gaining ground in China would help Ford reduce its reliance on U.S. sales, which unexpectedly fell last month, and blunt European losses projected to exceed $1 billion this year. With GM and VW pushing into the Chinese hinterland in search of the next phase of growth, Chief Executive Officer Alan Mulally is committing $4.9 billion in spending on new factories and models in Asia to back his target to raise the region’s contribution almost fivefold to a third of global sales by 2020.

Strategy Shift
Introducing lower-priced models in China and Asia marks a shift in strategy for Ford, which has historically offered products to the higher end of its price segment, said Hinrichs, who was appointed to the Asia job in 2009 by Mulally after stints in labor affairs, manufacturing and running Ford’s operations in Canada.

In 2010, the company introduced in India the Figo hatchback, a move that helped almost triple deliveries in the fiscal year it went on sale. For China, less-developed cities in the country’s inland provinces hold the key to future sales growth, Hinrichs said.

Vehicle sales in China, including trucks and buses, are projected to rise 5 percent to 8 percent this year to 20 million units, according to the China Association of Automobile Manufacturers, even amid the slowest economic growth in three years.

While that’s slower than the explosive rates of growth in 2009 and 2010, when deliveries grew 46 percent and 32 percent respectively, it still makes China the most attractive market with the biggest potential, a trend that’s unlikely to change for years to come given the weakness of European demand, said Hinrichs.

Late Start
Ford’s newfound commitment to expand in China may prove too late as GM and VW entrench themselves as the automotive brands of choice with the car-buying public, according to Klaus Paur, an industry analyst.

When Ford first pushed into China in 2002, it was losing money at home and starting a wrenching restructuring. The company arrived in China almost a decade behind GM, which won a crucial partnership with Shanghai Automotive Industrial Corp. in 1995. Volkswagen built its first car in China in 1985.

The first-mover advantage shows. VW accounted for five of the 10 top-selling passenger vehicle models this year, GM had three, including the bestselling Buick Excelle and second-placed Chevy Sail. Ford’s Focus small car ranked eighth by sales, with Hyundai Motor Co. (005380)’s Verna rounding off the list, according to auto association data.

Ford had a 2.4 percent share of the country’s light-vehicle market, compared with 19 percent for VW and 10 percent for GM, data from industry researcher LMC Automotive show.

‘Less Aggressive’
“This is the story of Ford,” said Paur, Shanghai-based global head of automotive at researcher Ipsos. “They are slower and less aggressive than their competitors in bringing new cars into the market.”

To address that gap, Ford is building a $760 million assembly plant in Hangzhou, an hour west of Shanghai by high- speed train, slated for completion in 2015. The factory will double output in the country to 1.2 million vehicles annually. Expanding production in China is crucial because locally built autos are exempt from import duties that can add more than 25 percent to the price tag.

Ford will also add three SUVs to its China lineup to cater to more upscale demand, Hinrichs said. SUVs are the fastest- growing vehicle segment in China, with first-half sales gaining 32 percent versus 7.1 percent for total passenger-vehicle deliveries, according to auto association data.

SUV Demand
The Explorer SUV will be imported and available next year, while the automaker will build the Kuga, known as the Escape in the U.S., and smaller Eco Sport at its existing plant in Chongqing in southwestern China.

The carmaker has no plans at present to bring its premium Lincoln brand to China, according to the company, where it will compete against leaders Audi, BMW and Mercedes-Benz. Ford currently sells the Mondeo, Fiesta, Focus, S-Max minivan and the imported Edge in China.

Ford’s bid to catch up in China will be aided by the lack of brand loyalty, with the majority of buyers purchasing a vehicle for the first time, according to Jochen Siebert, managing director at JSC (Shanghai) Automotive Consulting Co.

“They are on the right track, going into the right segments, doing the right things,” said Siebert, who predicts Ford’s sales will almost triple in China to 1.1 million vehicles by 2018. “The new products will change the way people look at Ford.”

Hinrichs, touted as an internal contender to succeed Mulally as CEO, recognizes that the expansion plan will take several years to bear fruit. Reminders that China is one of the most competitive markets are also never far away.

“There’s no home run in this,” said Hinrichs, who is chauffeured in Shanghai in a Lincoln Navigator SUV. “I look out the window and there will be brands I don’t recognize. I’ll ask my driver but sometimes he also doesn’t know.”

[Bossxr8]

Originally Posted by Road_Warrior

Yep, plants for China in particular are going to be huge, a new one just announced is going to have a capacity of 1.2 million units per year, and they need that capacity purely to satisfy their domestic market which will eclipse the whole North American market soon

EDIT: Here's the article I was talking about, from Bloomberg:

FoA are a part of this, designing and engineering a car specifically for China. Its supposed to be Focus based.

[jpd80]

Originally Posted by Bossxr8

FoA are a part of this, designing and engineering a car specifically for China. Its supposed to be Focus based.

FAPA has at least three projects on the go at the moment...

[distortion]

"Expanding production in China is crucial because locally built autos are exempt from import duties that can add more than 25 percent to the price tag."

This is why Australia can't compete in Asia. They impose tariffs on us, but we don't them... Manufacturing is essential to any nation, and ours is being flushed by pollies...

[Kable72]

Originally Posted by distortion

"Expanding production in China is crucial because locally built autos are exempt from import duties that can add more than 25 percent to the price tag."

This is why Australia can't compete in Asia. They impose tariffs on us, but we don't them... Manufacturing is essential to any nation, and ours is being flushed by pollies...

A little off topic but I refuse to believe that FordAU don't want to put more sophisticated technology into the aussie cars. I believe that because they use australian labour to manufacture, with our high labour costs, they have to keep costs down to keep the price competitive with similar cars. We need tariffs so we can keep money in australia. Fair enough, we need to import so that we can continue exporting, but with the little to any tariff we impose isn't not fair to aussies that lose jobs to the 8 year old chinese kid working for $2 an hour.

[jpd80]

Originally Posted by distortion

"Expanding production in China is crucial because locally built autos are exempt from import duties that can add more than 25 percent to the price tag."

This is why Australia can't compete in Asia. They impose tariffs on us, but we don't them... Manufacturing is essential to any nation, and ours is being flushed by pollies...

Also, to do business, foreign companies must be partnered 50/50 with a local company,
so there goes half of the profits right away...

You only have to look at GM and their partnerships with SAIC and Wuling to know just how little profit there is.
Annually, GM and its partners make many millions more cars than Ford yet they still barely match Ford's profits.

[Luke Plaizier]

It's not high wages that hurt Ford Australia, it's low volume.

I concur, that it is irresponsible to have such low tariffs for imported cars in Australia, while China, Japan, Brazil, Europe et al just blatantly holds theirs so high.

Perhaps Australia is trying to lead by example, but when the example shows that local production goes bankrupt in low-tariff zones, other countries will think twice about EVER doing it.


Lukeyson

[Kable72]

Originally Posted by Luke Plaizier

It's not high wages that hurt Ford Australia, it's low volume.

I concur, that it is irresponsible to have such low tariffs for imported cars in Australia, while China, Japan, Brazil, Europe et al just blatantly holds theirs so high.

Perhaps Australia is trying to lead by example, but when the example shows that local production goes bankrupt in low-tariff zones, other countries will think twice about EVER doing it.


Lukeyson

Other countries aren't going to care if local business goes bust because of low tariff because we are too busy buying their **** for it to matter.

[jpd80]

Originally Posted by Luke Plaizier

It's not high wages that hurt Ford Australia, it's low volume.

I concur, that it is irresponsible to have such low tariffs for imported cars in Australia, while China, Japan, Brazil, Europe et al just blatantly holds theirs so high.

Perhaps Australia is trying to lead by example, but when the example shows that local production goes bankrupt in low-tariff zones, other countries will think twice about EVER doing it.


Lukeyson

But it's quite OK for us to charge China, Japan and Korea $330/tonne for coking coal when it was way less five years ago..
Yes, Thailand played dirty pool with "legal" import taxes but what is Australia doing about it?
Nothing.

[Kieron]

Actually, its a combination of many things including high wages, low volume, strong Aussie dollar, no tarrif protection etc that all conspire against local production in my view.

[Wretched]

Australia is not an inviting country to invest in.
The cost to do business in Australia (wages, red tape, etc) is far too high and really not worth the effort.

The government need to adjust their policies to encourage business investment here. I am not talking of handouts of cash, I mean easing on the red tape, the cost of setting up, tax breaks, etc.

[jpd80]

Originally Posted by Wretched

Australia is not an inviting country to invest in.

No, the dollar is high because it is a safe haven in which to invest.
That is different to direct investment in plants and manufacturing

The cost to do business in Australia (wages, red tape, etc) is far too high and really not worth the effort.

The government need to adjust their policies to encourage business investment here. I am not talking of handouts of cash, I mean easing on the red tape, the cost of setting up, tax breaks, etc.

Dropping tariffs is only the start, much more must be done to attract business here.

Example,
Ford builds new $500 million plant in Thailand, the Thailand National bank lends them the money to do it...
I be they don't pay much interest if anything at all..

[BroadyFord]

^^ Yep, just as an example, Autodom workers in Dandy (key supplier to big 3) have gone on strike.

Therein lies the problem why we haven't got a hope in hell of competing with the Asians.

[robbo/region15]

Originally Posted by BroadyFord

^^ Yep, just as an example, Autodom workers in Dandy (key supplier to big 3) have gone on strike.

.

Autodom /Dandy[Dair] are on Strike today re;there EBA.Doesnt mean the casuals & non -union wont go into work though.....
*Would love to know who are the 30 companies @ Jeffs Shed today re;Herald sun story????

[Road_Warrior]

I have a bit of a fundamental issue with taxpayer funds being used to facilitate Thailand headhunting our industries to set up over there. The government should be protecting the interests of local industry, not underhandedly encouraging foreign countries to undermine it.

The rep from the Thai government boasts about their workers getting paid a dollar an hour, like it is something to be proud of. I don't consider that something to be proud of.

Labour costs in Australia are the price you must pay to have a manufacturing base in a politically stable, disaster free country (comparatively). What are they going to do when the next flood or military coup hits Thailand?

[Wretched]

Originally Posted by Road_Warrior

I have a bit of a fundamental issue with taxpayer funds being used to facilitate Thailand headhunting our industries to set up over there. The government should be protecting the interests of local industry, not underhandedly encouraging foreign countries to undermine it.

The rep from the Thai government boasts about their workers getting paid a dollar an hour, like it is something to be proud of. I don't consider that something to be proud of.

Labour costs in Australia are the price you must pay to have a manufacturing base in a politically stable, disaster free country (comparatively). What are they going to do when the next flood or military coup hits Thailand?

Why isn't it something to boast?
They can do the job at a cheaper labor cost because their economy allows it. It isn't slave labor it is just the value of their currency relative to ours.
Their cost of living allows it to happen.

Funny how Aussies love to brag about going to Thailand and the like to exploit the good Aussie $ when it suits them but when the shoe is on the other foot...

Regarding business risk, don't forget our jumpy unions whom like to strike at every opportunity, just as much downtime as a natural disaster.

[XplosiveR6]

Originally Posted by Wretched

Why isn't it something to boast?
They can do the job at a cheaper labor cost because their economy allows it. It isn't slave labor it is just the value of their currency relative to ours.
Their cost of living allows it to happen.

Funny how Aussies love to brag about going to Thailand and the like to exploit the good Aussie $ when it suits them but when the shoe is on the other foot...

Regarding business risk, don't forget our jumpy unions whom like to strike at every opportunity, just as much downtime as a natural disaster.

Have you been to Thailand?? Have you seen how these people live on $1 an hour? Yes cost of living is cheaper there, but not THAT much cheaper, petrol, cars, electricity etc are still priced similar to here. How about you move to Thailand and see how your quality of live is on $10 a day...

[Road_Warrior]

Also, in 10-15 years, there could be up to one billion cars on the road in China.

ONE BILLION.

Having a new assembly plant that can smash out 1.2 million cars per year doesn't seem that extraordinary when you look at the market it is going to be playing in!

By that time, labor costs in China may match or even exceed that in the US - see:

http://www.heraldsun.com.au/business...-1226438065496

As countries like this rapidly industrialise and modernise, the benefit of manufacturing in these "low cost" countries will be come less so. I guess at that point the big corporate players will simply set up shop somewhere else...

[Bossxr8]

Yeah the union at Ford is so bad, 13 years there and i've never been on strike.

Those damn unions are ruining the company

[robbo/region15]

I remember how the AMWU [the one who loved the sound of her own voice] instructed us who to Vote for in 96? Federal Election....it wasnt J Howard either.............